Currently the likes of Amazon, eBay and Alibaba, among many others, sell to Australian consumers but do not charge or collect the GST on low-value tangible goods, but they do collect GST on intangible products such as movies, ebooks and music.
This is going to change in about a year. That is a good thing for Australian consumers and businesses. It should have happened some time ago but the big international companies used their muscle and money to block the change for too long and now disappointingly, they have had the change deferred.
There has been an ongoing debate for some time about imposing GST on low-value goods purchased from within Australia from overseas. The debate is as far as we are concerned very straightforward. If a person in Australia purchases goods on the internet they should pay GST, the same as if they purchase from a bricks-and-mortar shop. But we currently have a situation where if you purchase goods under the $1000 threshold online from an Australian business you pay GST and if you purchase online from an overseas business you don’t pay GST. Some people aren’t even aware of where their goods are coming from — they just buy it and wait for it to turn up.
Hopefully, it is obvious why it is good for businesses to charge the GST on all sales. Currently overseas businesses are given an advantage as they do not have to add the extra 10% GST to purchases and they do not have the extra paperwork associated with sales into Australia. That means that Australian businesses are disadvantaged and will struggle to compete.
Why it is good for the consumer may be less obvious. Basically, these big multinationals not only do not collect GST but they also do not pay tax in Australia. They dodge tax. They are not good members of the business community. They do not supply jobs to Australians.
So the Australian consumer — every one of us — has to pay more tax to make up for the shortfall and we also have less job opportunities.
Perhaps it has been too difficult to collect the GST in the past but with new technologies and increasing international trade, there is a compelling need to collect the GST and we have the capacity to do so. As the government has pointed out, new technologies have reduced the cost of collection of this revenue, and by targeting the top 50-100 online retail providers, there are cost-effective, indeed cost-neutral, ways of collecting the revenue.
This is not about protectionism for local business; it is about ending an era of protectionism for offshore businesses, large and small. While hundreds of thousands of small Australian businesses collect and pay our fair share of GST, governments have continued to protect offshore businesses that do not pay tax, do not employ Australians, and do not contribute to Australian hospitals, schools, roads and other essential services.
The arguments presented by those against the change are odd at best. Some advocacy groups have argued that it is unfair on the consumer as they will end up paying more. So these groups must be against the GST as a tax? When the GST was introduced it meant that everyone paid 10% more on their purchases but when it was first introduced no one understood the impact that the internet would have on sales. So we either apply the GST fairly on all sales made from within Australia or we could scrap the GST? Either way it would be fair for all.
Some argue that collecting the GST on overseas purchases would be too expensive. It will actually cost the same as collecting the GST on local purchases.
The most ridiculous arguments came from the likes of Amazon, eBay and Alibaba themselves. They’ve stated that it would be too hard to collect the taxes. Welcome to the world of small business (that argument doesn’t get traction if we push it is too hard!). Also, they already collect the GST on intangibles so it actually isn’t too hard.
Their other argument is that they will no longer sell into Australia if the threshold is scrapped, as it will be too hard and complex. That is out and out blackmail. These giant companies will sell wherever they can make a profit — it has nothing to do with the GST. More than 50 jurisdictions around the world already charge their version of a GST and those companies still sell goods and collect the tax.
But despite all this, these companies have delayed the introduction of the change. This won’t help much with getting rid of the budget deficit.
Let’s create a level playing field on the internet as well as elsewhere and while we are at it, make these multinationals pay their taxes or ban their goods from entering Australia until they do so. It also seems that the Australian government has the option of closing down websites of companies that don’t comply.
If Australia led the way on enforcing tax compliance on global retailers maybe we could change the way the world tax system works? That would be good for Australia, third world countries trying to develop a middle class, and for the reputation of our regulators.
Peter Strong was CEO of COSBOA for many years, and has worked for the federal public service, the World Bank and the UN.
